Billionaire investor Stanley Druckenmiller believes that the US economy will be a hard landing by the end of 2023 as the Federal Reserve s aggressive monetary tightening will cause a recession.
I will be stunned if we don't have a recession in 23. I don't know the timing but I think it will be by the end of 23. Druckenmiller said at the Delivering Alpha Investor Summit on Wednesday that he will not be surprised if it is not larger than the so-called average garden variety. I don't rule out anything really bad. Druckenmiller, one of Wall Street's most respected minds, expressed concerns about the situation in the bond market after the Fed quantitative easing during the coronaviruses epidemic and its near zero interest rate policy in the past decade have created an asset bubble.
The Federal ReserveFederal Reserve held the fed funds target rate at a range of 0% to 0.25% between 2008 and 2015, as it countered the financial crisis and its aftermath. The Fed cut rates to near zero in March 2020 in response to the COVID - 19 epidemic. A decade-long period of quantitative easing doubled the central bank's balance sheet to nearly $9 trillion.
Opinion: The Fed won a major battle against inflation but doesn't believe it because the data has a fatal flaw.
By adding more liquidity to the financial system, the Fed also helped fuel gains in stocks, bonds, housing, and other assets.
With a rock-bottom interest rate, the Dow Jones Industrial Average DJIA rose over 40%, while the S&P 500 SPX jumped over 60%, and the Nasdaq Composite COMP gained over 80% between March 2020 and December 2021, according to Dow Jones Market Data.
The central bank raised interest rates by 75 basis point rate hikes in three consecutive meetings and also increased the central bank's quantitative tightening in June. It marked the Fed's toughest policy move since the 1980s to tame the hotter than expected inflation.
The stock market rout looks like the dot-com bust of 2000, says investing gurus.
According to Druckenmiller, the Fed made mistakes on the risk-reward bet they made, and the repercussions of that are going to be with us for a long time. We have 5 trillion in fiscal stimulus, and we have 5 trillion in QE, he said. The Fed didn't forecast the monetary framework in the fall of 2020. They were going to be data-dependent and wait until they see the whites of inflation's eyes. They saw the whites of their eyes. The S&P 500 closed at its lowest level in nearly two years Tuesday, while cementing its longest losing streak since February 2020, the U.S. stock indexes traded higher on Wednesday after the S&P 500 closed at its lowest level in nearly two years. The large-cap index went up 1.5%, while the Dow and the Nasdaq gained 1.4%.